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[2014] ZASCA 183
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Jili v Firstrand Bank Ltd t/a Wesbank (763/2013) [2014] ZASCA 183; 2015 (3) SA 586 (SCA) (26 November 2014)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
No: 763/2013
REPORTABLE
In
the matter between:
HELEN
NOKUBONGA
JILI
...........................................................................................
APPELLANT
and
FIRSTRAND
BANK LTD t/a
WESBANK
..................................................................
RESPONDENT
Neutral
citation:
Jili v Firstrand Bank Ltd
(763/13)
[2014] ZASCA
183
(26 November 2014)
Coram:
M
aya
,
Shongwe, Leach and
Willis
JJA and M
ocumie
AJA
Heard:
13
November 2014
Delivered: 26
November 2014
Summary:
National Credit Act 34 of 2005
– interpretation of
s 88(3)
thereof – an original credit agreement is enforceable against a
defaulting credit consumer without further notice if the
relevant
debt re-arrangement order is breached – summary judgment –
court to exercise its discretion to refuse it only
where there exists
a reasonable possibility that an injustice may be caused – no
basis to interfere with order of the high
court granting summary
judgment against the appellant defaulting on her rescheduled
repayments on an instalment sale agreement
– appeal dismissed.
ORDER
On
appeal from
:
KwaZulu-Natal
High Court,
Durban
(
Kruger
J sitting as the court of first instance)
The
appeal is dismissed, the appellant to pay the respondent’s
costs.
JUDGMENT
Willis
JA (Maya and Shongwe JJA and Mocumie AJA concurring):
[1]
The appellant appeals, with the leave of this court, against the
order of summary judgment which was granted against her in
the
Kwazulu-Natal High Court, Durban (Kruger J). The appellant was
ordered to return a motor vehicle, which was a 2007 Volkswagen
Jetta
1.6 Trendline, to the respondent (the bank), failing which, the
Sheriff was authorized to attach it. The high court postponed,
sine
die, the question of judgment in respect of the damages which the
bank may have suffered. The high court ordered the appellant
to pay
the costs of the application for summary judgment as well as the
costs of the action to the date of the judgment.
[2]
The National Credit Regulator has been admitted to these proceedings
as an amicus curiae. It supports the appellant in her appeal
but
entered the fray only with regard to the correct interpretation of s
88(3) of the National Credit Act 34 of 2005 (the NCA).
[3]
In November 2007, the appellant and the bank concluded an instalment
(spelt with one l in the NCA and agreement) sale agreement
in respect
of the motor vehicle. By March 2011, the appellant was experiencing
difficulties in meeting her financial obligations
to the bank, which
had arisen as a result of the instalment sale agreement. The
appellant approached a debt counsellor, applying
for debt review in
terms of s 86(1) of the NCA. The debt counsellor thereupon, in terms
of s 84(6) of the NCA, notified all the
credit providers to whom the
appellant was indebted as well as every registered credit bureau.
[4]
The debt counsellor found that the appellant was over-indebted and,
in April 2011, forwarded a proposal to all the appellant’s
creditors, including the bank, for the rescheduling of the repayment
of the appellant’s debt. The debt counsellor proposed
that the
appellant’s repayments in terms of her agreement with the bank
be reduced to R1714.44 per month. The bank accepted
the proposal.
[5]
In October 2011, the debt counsellor brought an application, on
behalf of the appellant, in the Magistrate’s Court in
Pietermaritzburg for an order that she was over-indebted and
rescheduling her debt to various credit providers in terms of ss
86(8) and 87(1)
(b)(ii)
of the NCA. The magistrate granted the
order on 4 November 2011.
[6]
In March and April 2012, the appellant fell into arrears in respect
of her rescheduled repayments to the bank but made this
default good
in July 2012. In the meantime, on 25 May 2012, the bank instituted an
action against the appellant for the return
of the vehicle and
recovery of the debt. The action was defended. On 24 August 2012 the
bank applied for summary judgment. The
application was opposed. It
was common cause that the appellant had not purged her default by the
time the application for summary
judgment was heard.
[7]
In her affidavit resisting summary judgment, the appellant said the
following:
‘
[16]
. . .On 11 June 2012 my attorney confirmed in writing a proposal that
I would bring the arrears up t date by paying the arrears
of
R3428.86, and requested the plaintiff’s attorneys to take
instructions in this regard… This proposal – which
I
respectfully submit was a most reasonable proposal – was made
in the spirit of keeping alive the rearrangement order that
had been
made and enabling me ultimately thereby to satisfy in due course all
my financial obligations to all of the credit providers
concerned,
including the plaintiff. However, it was summarily rejected by the
plaintiff . . . .’
The
appellant’s defence is, in effect, a plea
ad
misericordiam
.
[1]
[8]
The bank succeeded. Referring to the provisions of s 88(3) of the
NCA, the high court relied strongly on the judgment of Eksteen
J in
FirstRand
Bank Ltd v Fillis & another
[2]
to hold that, once a debtor has defaulted in terms of an order by a
magistrate for the re-arrangement of debt, the order is automatically
terminated. Correspondingly and simultaneously, in the view of the
court, the termination of the order gave rise to the requisite
jurisdictional facts that enable a creditor to proceed to obtain
judgment against the debtor. The high court found that the appellant
had no bona fide defence to the application for summary judgment and,
in the result, granted the relief sought by the bank.
[9]
Counsel for the parties agreed that the case turns on the following
points of law:
(a)
Could the bank rely on the appellant’s default in March and
April 2012 to proceed as it did, without first obtaining an
order
setting aside the magistrate’s order re-arranging the repayment
of the appellant’s debt; and
(b)
If the bank could so rely upon the appellant’s default, did the
court have a discretion not to grant judgment in favour
of the bank;
and
(c)
In the event that the court had this kind of discretion, did the
court exercise it in a judicial manner, having regard
to all
the circumstances of the case?
[10]
Counsel for the appellant submitted that, even though the
Constitutional Court had pronounced plainly on the interpretation
of
s 88(3) of the NCA in
Ferris
& another v FirstRand Bank Ltd
[3]
,
this was merely obiter and should not be followed. Relying on the
Constitutional Court’s judgment in
Sebola
& another v Standard Bank of South Africa Ltd & another
,
[4]
the appellant also submitted that an important purpose of the NCA is
to promote non-litigious methods of resolving consumer defaults
and that ‘weight must be given to constitutional considerations
in assigning meaning to the statute’s provisions. ’The
appellant furthermore contended that a court always had a discretion
to refuse to grant summary judgment and that in this particular
case
the discretion should so be exercised. The amicus submitted that
there was a lacuna in the provisions of s 88(3) that did
not have
regard to the interests of the other credit providers. The respondent
supported the Constitutional Court’s reasoning
in
Ferris
v FirstRand Bank
and
submitted that the discretion to refuse summary judgment was confined
to situations where there was doubt about the indebtedness
of the
defendant, which obviously was not the position in the present case.
[11]
Section 88(3) of the NCA provides as follows:
‘
Subject
to section 86(9) and (10), a credit provider who receives notice of
court proceedings contemplated in section 83 or 85,
or notice in
terms of section 86(4)
(b)
(i), may not exercise or enforce by
litigation or other judicial process any right or security under that
credit agreement until
–
(a)
The consumer is in default under the credit agreement; and
(b)
one of the following has occurred:
(i)
An event contemplated in subsection (1)
(a)
through
(c)
;
or
(ii)
the consumer defaults on any obligation in terms of a re-arrangement
agreed between the consumer and credit providers,
or ordered by a
court
or the Tribunal.’ (My emphasis.) we use italics to
emphasize
[12]
In
Ferris
v FirstRand Bank
[5]
Moseneke ACJ, delivering the unanimous judgment of the Constitutional
Court, approved the reasoning in
Fillis.
He
said
at para 16:
‘
It
seems to me that an original credit agreement is enforceable without
further notice if the relevant debt-restructuring order
is
breached.’
Moseneke
ACJ said that this was ‘clear from the wording of the relevant
sections of the Act’.
[6]
He also noted that s 129(2) of the NCA ‘expressly stipulates
that the requirement to send a notice under s 129(1) is not
applicable to debts subject to debt-restructuring orders’
[7]
The
Constitutional Court has therefore set it free from doubt that, once
a debtor has defaulted in terms of an order by a magistrate
for the
re-arrangement of debt, a creditor is entitled to enforce the terms
of the loan agreement, without having to apply for
a variation or a
setting aside of the order of the magistrate. In my opinion, these
remarks by Moseneke ACJ were not obiter but
were part of the ratio
decidendi. In any event, remarks of the Constitutional Court, even if
merely obiter, carry great weight
indeed. To refuse to follow
Moseneke ACJ’s observations and remarks on this point would
create huge confusion among credit
providers and consumers. Moreover,
if every other credit provider affected by a debt-restructuring order
had to be given notice
of an application for summary judgment, it
would create a potentially never ending merry-go-round.
[13]
Insofar as the question of the high court’s discretion to grant
or refuse the application for summary judgment is concerned,
the
critically relevant fact is that it is common cause that the
appellant had no defence, recognised in law, to the fact that
she was
indebted to the bank. It is indeed trite that a court has a
discretion as to whether to grant or refuse an application
for
summary judgment.
[8]
Although
Breitenbach
v Fiat SA (Edms) Bpk
[9]
has made it plain that a court should exercise a discretion against
granting such an order where it appears that there exists ‘a
reasonable possibility that an injustice may be done if summary
judgment is granted’,
[10]
the context in which that was said indicates that this precaution
applies in situations where the court is not persuaded that the
plaintiff has an unanswerable case.
[11]
[14]
It is a different matter where the liability of the defendant is
undisputed: the discretion should not be exercised against
a
plaintiff so as to deprive it of the relief to which it is
entitled.
[12]
Where it is
clear from the defendant’s affidavit resisting summary judgment
that the defence which has been advanced carries
no reasonable
possibility of succeeding in the trial action, a discretion should
not be exercised against granting summary judgment.
[13]
The discretion should also not be exercised against a plaintiff on
the basis of mere conjecture or speculation.
[14]
The consequences of refusing summary judgment in this particular case
are entirely speculative.
[15]
In all the circumstances of the matter, the high court cannot be
faulted for having granted summary judgment. Although this
case has
raised issues of constitutional importance, it was not primarily
driven by either party in order to test its constitutional
rights.
This is not a case where the principles relating to costs, set out in
Biowatch
Trust v Registrar, Genetic Resources & others
,
[15]
should apply.
[16]
The following order is made:
The
appeal is dismissed, the appellant to pay the respondent’s
costs.
_______________________
N
P WILLIS
JUDGE
OF APPEAL
Leach JA (Maya
and Shongwe JJA and Mocumie AJA concurring):
[17] I have read the
judgment of Willis JA, but while I agree that summary judgment was
correctly granted by the high court and
that the appeal should be
dismissed, the judgment does not fully reflect my views on the
matter.
[18]
The instalment sale agreement concluded between the appellant
and the respondent in November 2007 resulted in
the appellant becoming indebted to the respondent in a total sum of
R245 468
inclusive of financial charges and VAT. The debt was
repayable by way of 60 monthly instalments commencing on 16 January
2008,
the first 59 instalments being in a sum of R3 100,05 with a
final so-called ‘balloon’ payment of R62 565,05
payable
on 27 November 2012 (these details are reflected in a payment
scheduled attached to the agreement; they differ slightly from those
reflected in the agreement itself but nothing turns on this for
present purposes).
[19]
Some three years later the appellant, who was then in financial
difficulties, approached a registered debt counsellor and applied
for
a debt review under s 86(1) of the NCA. Pursuant to procedures
outlined by that Act, a debt re-arrangement order was made in
the
Pietermaritzburg Magistrate’s Court by consent under s 86(8) of
the NCA. Under such order the obligations of various
of
the
appellant’s credit providers, including the respondent, were
re-arranged and the appellant became obliged to pay the respondent
a
much reduced monthly instalment of R1 714,44 over an estimated
period of 68 months in order to repay the balance of
R117 130,31 then still owing. Not only was this new instalment
substantially less than that set out in the initial credit
agreement
but it was payable over a period far in excess of the original
period.
[20]
Despite the terms of this debt re-arrangement order extending
substantial relief to the appellant in regard to her monthly
commitments,
she failed to pay her
instalments for March 2012 and April 2012. The respondent accordingly
issued summons against her, claiming
the return of the motor vehicle
that was the subject of the instalment sale agreement as it was
entitled to do under the contract.
It was only on 13 July 2012, after
the institution of the respondent’s action, that the appellant
paid the instalments due
for March and April 2012. But, as this did
not extinguish her debt in respect of further amounts that had since
become due under
the debt re-arrangement order, the respondent
proceeded to apply for summary judgment for return of the motor
vehicle.
[21]
In seeking to avoid summary judgment the appellant argued, both in
the court below and in this court, that the respondent had
not been
entitled to simply issue summons while the re-arrangement order
remained in force and that, without that order being rescinded
or
varied, any action to enforce its terms was premature. In this
regard, the appellant relied upon the unreported judgment in
Reid
v Standard Bank of SA Ltd
[2011]
ZAKZPHC 34. In that matter, the respondent bank had sought summary
judgment against the appellants arising from their liability
to pay
certain amounts under three mortgage bonds. The appellants
sought to oppose by alleging that their debt obligations
had been
re-arranged under an order granted by a magistrate under s 86(7) of
the NCA although the respondent alleged that the appellants
had not
paid any amounts under that order. A high court had granted summary
judgment but, on appeal to a full bench, its order
was set aside by
Lopes J (with whom Jappie J and Ndlovu J concurred), who inter alia
stated:
‘
In
my view it was incumbent on the respondent to have applied to set
aside the Magistrates’ Court orders rather than seeking
simply
to ignore them. Once a court order is granted, it is valid and
enforceable until and unless set aside. As pointed out by
counsel for
the appellants, any assumption of invalidity would possibly affect
other parties to the order.’
[22]
This decision, however, flies in the face of the provisions of s 88
of the NCA which deals with the effect of debt review on
a
re-arrangement order or agreement. Section 88(3) provides that a
credit provider who has received notice of an application for
debt
review:
‘
.
. . may not exercise or enforce by litigation or other judicial
process any right or security under that credit agreement until
─
(a) the consumer is
in default under the credit agreement; and
(b) one of the
following has occurred:
(i)
. . .; or
(ii)
the consumer defaults on any obligation in terms of a re-arrangement
agreed between the consumer and credit providers, or ordered
by a
court or the Tribunal.’
In
FirstRand Bank
Ltd v Fillis
2010 (6) SA 565
(ECP) para 16 Eksteen J, in dealing
with the NCA and s 88(3) in particular, stated:
‘
It
follows . . . that once the jurisdictional requirement set out in s
88(3)(
a
)
co-exists with any one of the jurisdictional requirements set out in
s 88(3)(
b
),
the credit provider is at liberty to proceed and to exercise and
enforce, by litigation or other judicial process, any right
or
security under his credit agreement, without further notice.
’
[23]
It was argued on behalf of the appellant that
Fillis
had been wrongly decided, but the insurmountable problem facing the
appellant in this regard is the fact that the Constitutional
Court
has already reached the contrary conclusion in
Ferris
v FirstRand Bank Ltd
2014
(3) SA 39
(CC) and, in doing so, cited with approval the passage from
the
Fillis
judgment quoted above.
[16]
In regard to the effect of s 88, Moseneke ACJ, in delivering the
unanimous judgment of the court in
Ferris
,
said:
[17]
‘
Once
the restructuring order had been breached, FirstRand was entitled to
enforce the loan without further notice. This is clear
from the
wording of the relevant sections of the Act. Section 88(3)(
b
)(ii)
does not require further notice ─ it merely precludes a credit
provider from enforcing a debt under debt review unless,
among other
things, the debtor defaults on a debt-restructuring order.
’
[24] Counsel for the
appellant argued that the conclusion of the Constitutional Court in
regard to s 88 was both obiter and clearly
wrong, and that this court
was entitled to reach a contrary conclusion. I do not agree. In the
first instance, such conclusion
is in my view clearly right. But in
any event, the contention that it was obiter is unsustainable. The
appellants in
Ferris
had sought to rescind a default judgment
on the basis that it had been erroneously sought or granted against
them as there was a
debt re-arrangement order in place. Although that
order recorded that the rights and obligations amended by the order
would be
‘fully enforceable’ in the event of the order
being breached, this did no more than spell out the effect of s
88(3).
The clear
ratio decidendi
of the case was that the
breach of the debt re-arrangement order entitled the bank to enforce
the loan without further notice.
[25] In these
circumstances,
Reid
was wrongly decided in so far as it held
that a debt re-arrangement order that had been breached had to be
varied or set aside before
the affected creditor could seek to
enforce its claim. In the present matter, therefore, the appellant’s
default under the
debt re-arrangement order entitled the respondent,
without further ado, to proceed to recover the motor vehicle in
question from
her. The appellant had neither purged her default at
the time the summary judgment application was heard nor had any
defence to
the respondent’s claim at that stage.
[26] I turn to the
appellant’s submission that even if she has no defence, the
court a quo should have exercised its discretion
to refuse summary
judgment and thereby afforded her the opportunity of fulfilling her
obligations under the debt re-arrangement
order. In advancing this
argument, counsel for the appellant emphasised that the NCA was
intended to protect consumers and to promote
social and economic
welfare and a fair, transparent, competitive, effective and
accessible credit market.
[27] The simple
answer to this argument is, of course, that a court’s
discretion to refuse summary judgment is limited to
those cases where
there may be some doubt as to the defendant’s liability. There
is no such doubt in this case. It is not
disputed that the respondent
is entitled to the order that it seeks if the debt re-arrangement
order earlier granted by the magistrate
does not bar the respondent’s
claim which, for the reasons already given, it does not.
[28] Moreover, as
this court stressed in
Nedbank Ltd v National Credit Regulator
2011 (3) SA 581
(SCA) para 2, a passage cited with approval by the
Constitutional Court in
Sebola v Standard Bank
of South
Africa Ltd
2012 (5) SA 142
(CC) para 40, notwithstanding the
objective of the NCA to protect consumers, there has to be a careful
balancing of the competing
interests sought to be protected and
further that the interests of creditors should ‘also be
safeguarded and should not be
overlooked’.
[29]
The appellant has already enjoyed the considerable benefit afforded
by a debt re-arrangement order that substantially reduced
her monthly
instalments and at the same time increased the period available to
her to effect repayment. As Eksteen J observed in
Fillis
:
[18]
‘
The
Act provides very extensive protection to a consumer who has become
over-indebted, whether it be of his or her own making or
through
circumstances beyond his or her control. Not only does a
rearrangement afford him or her alleviation from the onerous monthly
obligations that he or she has in all seriousness undertaken to his
or her credit providers but he or she also enjoys the protection
of s
103(5) against the ravaging effect of escalating interest whilst he
or she remains in default under the credit arrangement.
If, however,
he or she fails to embrace this opportunity, or he or she is,
notwithstanding this very considerable assistance, unable
to comply
with his or her restructured debt commitment, the Act permits the
common law to run its course.
’
[30] To allow the
appellant, who has spurned the advantages flowing from the
magistrate’s order of 4 November 2011 by defaulting
in her
payments, a yet further opportunity to attempt to get her affairs in
order at the expense of the respondent who is entitled
to the relief
it seeks, would not be in the interests of justice. To refuse summary
judgment would be to afford the appellant a
further advantage not
envisaged by the NCA ─ and a second bite at the cherry, so to
speak ─ to the detriment of the
clear rights of the respondent.
[31] For these
reasons the appeal should be dismissed with costs. The amicus curiae,
to whom this court is grateful, sought no order
as to its costs and
no order need be made in that regard.
______________________
L
E LEACH
JUDGE
OF APPEAL
APPEARANCES:
For
the Appellant:
PJ Blomkamp
Instructed
by:
WHA
Compton Attorneys
,
Pietermaritzburg
c/o
Lovius Block
, Bloemfontein
For
the Respondent:
N Konstantinides
Instructed
by:
Legator
McKenna Inc
,
Durban
c/o
Matsepes Inc
, Bloemfontein
For
the
Amicus Curiae
:
AJ
Van Lapaan
Instructed
by:
Nyapotse
Inc
,
Johannesburg
c/o
McIntyre & Van der Post
, Bloemfontein
.
[1]
See
for example
Saloojee
& another NNO v Minister of Community Development
1965 (2) SA 135
(A) at 141C-D.
[2]
FirstRand
Bank Ltd v Fillis
&
another
2010
(6) SA 565
(ECP) esp paras 14 and 16.
[3]
Ferris
&
another
v FirstRand Bank Ltd
2014
(3) SA 39
(CC).
[4]
Sebola
& another v Standard Bank of South Africa Ltd & another
2012
(5) SA 142 (CC).
[5]
Ferris
&
another
v FirstRand Bank Ltd
2014
(3) SA 39
(CC).
[6]
Para
14.
[7]
Ibid
[8]
See
for example
Gruhn
v M Pupkewitz & Sons (Pty) Ltd
1973
(3) SA 49
(A) at 58D-59A and
Breitenbach
v Fiat SA (Edms) Bpk
1976
(2) SA 226
(T) at 229B-H.
[9]
Breitenbach
v Fiat SA (Edms) Bpk
1976
(2) SA 226
at 229H.This case has been referred to with approval by
this court in
Tesven
CC & another v South African Bank of Athens
2000 (1) SA 268
(SCA);
[1999] 4 All SA 396
(A) para 22 and
Soil
Fumigation Services Lowveld CC v Chemfit Technical Products (Pty)
Ltd 2
004
(6) SA 29
(SCA) para 24.
[10]
Breitenbach
v Fiat
at
229B-H. See also
Shepstone
v Shepstone
1974 (2) SA 462
(N) at 467E-H and
Jacobsen
van den Berg SA (Pty) Ltd v Triton Yachting Supplies
1974
(2) SA 584
(O) at 589D to which cases Colman J referred with
approval in
Breitenbach
v Fiat
at
229D and 229F-G respectively.
[11]
Breitenbach
v Fiat
at
229D-E. See also
Shepstone
v Shepstone
at 467E-H to which, as mentioned in footnote 7 above,
Colman
J referred with approval in
Breitenbach
v Fiat
at
229D-E.
[12]
Breitenbach
v Fiat
at
229C-G. See also
Shepstone
v Shepstone
at 467E-H and
Jacobsen
van den Berg SA (Pty) Ltd v Triton Yachting Supplies
to
which cases, as mentioned in footnote 7 above, Colman J referred
with approval in
Breitenbach
v Fiat
at
229D and 229F-G respectively.
[13]
Breitenbach
v Fiat
at
229E. See also
Shepstone
v Shepstone
at 467E-H.
[14]
Breitenbach
v Fiat
at
229E-F.
[15]
Biowatch
Trust v Registrar, Genetic Resources & others
2009
(6) SA 232 (CC).
[16]
Ferris
para
16.
[17]
Ferris
para
14.
[18]
Para 14.